1. (SBU) During a July 19 meeting with local legislators,
Hong Kong's new Secretary for the Environment Edward Yau
detailed the environmental agenda for Chief Executive Donald
Tsang's second administration. Yau said that Hong Kong

SIPDIS
Government (HKG) will strive to better regulate emissions
standards, promote more efficient energy usage and enhance
regional cooperation with Guangdong. Yau said he will
encourage greater community involvement and awareness in
environmental protection initiatives. He indicated that
actively involving electricity suppliers in improving air
quality, reducing emissions, and promoting renewable energy
will be one of his initial priorities. Yau reiterated that
the HKG will tie emissions reduction to the upcoming
negotiations over the Scheme of Control. He said his Bureau
has oversight over the Council for Sustainable Development,
which gives it a greater say in promoting sustainable
economic growth and development in Hong Kong. End Summary.

BACKGROUND
----------

2, (SBU) On July 1 Secretary Yau, a former Hong Kong civil
servant, replaced Sarah Liao as Hong Kong's chief
environmental policy maker. At the same time, as part of a
broader restructuring of the HKG, the responsibilities of the
former Bureau of Environment, Transportation and Works were
split between three new bureaus: Environment, Transportation
and Housing, and Development. The new Environment Bureau has
three branches: the Environmental Protection Department
(EPD), the Energy Policy Unit, and the Council for
Sustainable Development. The Departments of Highways,
Transportation, Drainage Services, Water Supplies, and Civil
Engineering and Development -- all formerly in Liao's purview
-- were de-linked from environmental policy issues.
According to several commentators, Yau's narrower portfolio
should allow him to focus more on environmental issues.

POWER GENERATION AND PUBLIC AWARENESS
-------------------------------------

3. (U) Testifying before the Hong Kong Legislative Council,
Secretary Yau said his bureau will work to implement the

SIPDIS
"policy initiatives that Chief Executive Tsang pledged during
the spring 2007 campaign," specifically to reduce pollution,
regulate emissions, work with energy suppliers and users to
promote greater energy efficiency, and enhance cross-border
cooperation with Guangdong. Yau said one of his priorities
would be to encourage greater involvement of civil society in
environmental protection, noting the important role that
NGO's and others can play in improving the quality of life of
Hong Kong residents. Educational awareness campaigns on a
variety of environmental issues -- from energy conservation
to reducing the use of plastic bags -- are all part of the
new bureau's campaign to get the public more involved in
protecting and securing Hong Kong's natural resources. Yau
did not rule out imposing levies on wasteful misuse of
resources.

4. (SBU) Yau said power generation in Hong Kong remains a
high priority for the new bureau, noting that 90 percent of
Hong Kong's sulfur dioxide (SO2) emissions and 50 percent of
its nitrogen oxide (NOx) come from the energy sector. To
address energy sector emissions and ensure a stable energy
supply, he proposed introducing more energy efficiency
technologies and renewable energy sources into existing and
future electricity production plants. He also claimed the
Bureau will step up regulation of power plants. Yau noted
that the HKG had begun negotiations over the "Scheme of
Control" agreement, which sets electricity tariffs and the
permitted rates of return for the power companies. In its
ongoing negotiations with Hong Kong Electric Company (HKEC)
and Exxon Mobil's China Light and Power (CLP), the two main
electricity companies, the HKG recently indicated a
willingness to tie each company's permitted rate of return to
its ability to reduce emissions. Yau also indicated that the
government will consider opening up the electricity market in
the next decade in an attempt to spur technological
innovation; while at least one company already has expressed
interest in entering the market, full liberalization would
not occur until 2018.

LNG TERMINAL AT SOUTH SOKO ISLAND
---------------------------------

HONG KONG 00002022 002 OF 002

5. (SBU) Yau reiterated the HKG's support for CLP's
construction of an LNG receiving terminal on South Soko
Island, a uninhabited island west of Hong Kong Island. The
HKG has approved CLP's environmental impact assessment and
EPD has issued a construction permit, with stipulations that
CLP take specific measures to safeguard fish habitats and
conduct other environmental preservation measures on and near
South Soko. CLP is awaiting approval of its financing plan
for the project. The South Soko project has been
controversial, even among environmental activists; the World
Wildlife Fund argued that the project would disturb a major
habitat for endangered pink dolphins and should be
constructed elsewhere in Hong Kong or on the mainland.
Environmentalists who focus on air quality, however, such as
former Legco member Christine Loh, have publicly supported
the LNG terminal (with strict environmental safeguards) as it
would help bring faster reductions in emission levels and
improve air quality. Loh also argues that placing CLP's
terminal in Guangdong would effectively continue the trend of
"dumping" Hong Kong's industrial projects onto the mainland,
where environmental oversight is not as strong. CLP, HKG
officials, and Loh all note that building the LNG terminal in
Hong Kong only involves approval of one jurisdiction, making
completion of the project faster and less likely to encounter
problems with mainland Chinese bureaucracy and/or corruption.
An LNG terminal in Hong Kong would allow CLP to source from
global supplies, making the company less reliant on Sinopec
and other mainland suppliers. South Soko's remote location
also would allow LNG tankers to avoid densely populated urban
centers when delivering fuel to Hong Kong.

SUSTAINABLE DEVELOPMENT AND RENEWABLE ENERGY
--------------------------------------------

6. (SBU) Officials from the Council for Sustainable
Development -- now part of the Environment Bureau -- also
recommend Hong Kong produce two percent of its electricity
from renewable sources by 2012, although environmental groups
generally prefer at least five percent. As a result of this
push, HKEC and CLP are researching the feasibility of
offshore wind farms. Despite these pledges to promote
renewable energy, however, a local wind energy specialist
believes Hong Kong's geography inhibits construction of large
scale wind projects; the Pearl River estuaries would be more
suitable. That specialist still hopes that discussion of
these plans will raise the profile of renewable technologies
among the general public and the business community in Hong
Kong and throughout the region. Josie Close of Hong Kong
University's Centre of Renewable Energy believes solar power
could better help Hong Kong meet its renewable energy goals,
but criticizes policy makers for not providing economic
incentives for architects, construction companies, and
building operators to incorporate these technologies into
their plans. Despite their public statements to the
contrary, Close believes the HKG and local business leaders
lack the political will to invest in next-generation
technologies for renewable energy.
Marut

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